Commissioner of Customs (Preventive), Jaipur v. M/s Acme Aklera Power Technology Pvt. Ltd., D.B. Customs Appeal No. 1/2025, Rajasthan High Court, Jaipur Bench (decided 10.08.2026)
- Background
The MOOWR, 2019 scheme is framed under Section 65 of the Customs Act, 1962. It allows an importer to defer payment of customs duty on capital goods by warehousing them and carrying on manufacture or other permitted operations in the warehouse, with duty becoming payable only when the goods are cleared. This scheme is widely used by solar, EV and other capital-intensive projects to manage their cash flow.
Here the taxpayer imported solar modules as capital goods for its solar power project and deposited them in its Section 65-licensed bonded warehouse. On scrutiny of ten ex-bond bills of entry, Customs found that a part of the modules remained un-installed, in the same condition as imported, beyond a period of ninety days, and the Department accordingly demanded interest of Rs. 2,88,17,955 under Section 61(2), read with paragraph 12 of CBIC Circular No. 34/2019-Customs. The Commissioner (Appeals) and the CESTAT both ruled in favour of the importer, holding that the modules were “intended for use” in the project despite the partial non-installation. The Department then appealed to the Rajasthan High Court.
- Issue Involved
- Whether the uninstalled capital goods imported under MOOWR license (permitted for Section 65 operations) can remain warehoused beyond ninety days without attracting interest under Section 61(2).
- Court’s Interpretation of the Provisions
The Hon’ble High Court Bench compared Section 61 as it stood before and after its substitution by the Finance Act, 2016, with effect from 14.05.2016. Under the earlier provision, every category of warehoused goods carried a fixed outer time limit, and interest was chargeable across the board once that period expired. The amended clause (a) now covers capital goods intended for use in an EOU, EHTP or STP unit, or in any warehouse where manufacture or other operations have been permitted under Section 65, and such goods may remain in the warehouse till their clearance, without any outer time limit. Only the residuary clause (c) retains a fixed period of one year, and the amended Section 61(2) charges interest only where goods specified in clause
(c) remain in the warehouse beyond ninety days.
The Court held that this omission of any interest charge on clause (a) or (b) goods was deliberate and was intended to make bonded manufacture under MOOWR attractive by deferring duty without imposing any interest burden.
The solar modules were capital goods bonded in a warehouse permitted under Section 65, and therefore squarely answered the description in clause (a). Since interest under the amended Section 61(2) attaches only to clause (c) goods, no interest was payable. The Department argued that the non-installation of some modules shifted them into clause (c), but the Court rejected this argument. Relying on State of Haryana v. Dalmia Dadri Cement Ltd. and BPL Display Devices Ltd. v. CCE, Ghaziabad, the Court held that “intended for use” must be tested at the time of import and is not to be judged with hindsight. Only 5.82% of the total modules imported for the project could not be installed, on account of a subsequent change in the project’s design and layout and a shortage of land, both of which were unforeseeable at the time of import. These modules were ex-bonded on payment of full duty once this position became clear. Such a marginal and after-the-fact non-installation does not convert clause (a) goods into clause (c) goods.
The Court held that paragraph 12 of Circular No. 34/2019 was not applicable. That paragraph addresses goods cleared “as such” from a warehouse that carries a dual licence under both Section 58 and Section 65, without undergoing any Section 65 operation, and this is a residuary clause (c) situation, as confirmed by the Circular’s own requirement of monthly Form B returns only for “non-section 65 purposes”. In any event, a circular issued under Section 151A binds only departmental officers, does not bind the courts, and cannot revive, through administrative instruction, an interest charge that Parliament had consciously withdrawn in 2016.
- Core Principles Affirmed
- “Intended for use” refers to the state of mind of the importer at the time of import or warehousing and is different from “actual use”. A later and unforeseeable inability to use the goods does not change their classification with retrospective effect.
- A deliberate gap left by the legislature cannot be filled or revived through an executive circular. A circular binds only departmental officers and cannot override the statute.
- A beneficial scheme that defers duty to promote bonded manufacture reflects a conscious policy choice made by Parliament. Since duty is paid in full and remains secured at the time of clearance, there is no real concern of revenue loss.
- Conclusions of the Court
The Court held that the solar modules answered the description in amended Section 61(1)(a), and that interest under Section 61(2) attaches only to residuary clause (c) goods. It further held that the marginal and supervening non-installation of some modules did not alter this classification, and that Circular No. 34/2019 and the case law relied upon by the Department did not apply on the facts of this case. The appeal was accordingly dismissed, and the CESTAT’s order was upheld, with no order as to costs.
- Action Points for Taxpayers
- MOOWR licensees may hold capital goods that are genuinely intended for permitted use in the warehouse without a fixed time limit and without interest under Section 61(2), however long clearance takes.
- Keep contemporaneous records, such as project layouts, designs, correspondence and installation schedules, that show the intended use of the goods at the time of import. This is the key evidence if later events prevent installation.
- Distinguish genuine Section 65 use from clearance “as such”, since Circular No. 34/2019 and interest under Section 61(2) continue to apply to the latter category, and document this distinction clearly.
- Reassess past interest payments or pending demands on Section 65-warehoused capital goods in light of this ruling, apply for refund in case of any interest payment.
- Businessman has to think about cash flow advantage of importing the capital goods under MOOWR where there is substantial amount of capital investment in the domestic manufacture.
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